TEMITAYO JAIYEOLA examines the information and communications technology sector in 2022 and how financing challenges and other economic obstacles affected its fortunes
The year 2022 is now locked in the history books, but its impacts on the world of technology won’t be easily forgotten.
Elon Musk’s acquisition of Twitter in October after an initial pushback on the deal dominated tech news globally. He was forced by the court to abide by the agreement and ultimately bought the microblogging and social media platform for $44 billion. Furthermore, in the short time that he has been CEO of Twitter, he has provided memorable content to the world of viewers.
Two years before 2022, the global tech ecosystem was the toast of the global economy. While other industries shrank or faced a recession, this industry boomed and tech companies were valued at all-time highs. The COVID-19 induced lockdown meant that people had to rely heavily on digital services and technology companies.
In early 2022, the tech ecosystem was on the rise, and the industry was considered by many to be immune to any economic downturn. However, the Russia-Ukraine war and high government spending during the pandemic led to record inflation rates, with central banks around the world raising interest rates in response, cutting off access to easy capital, have caused the technology sector to make a decision. paste.
Since peaking during the COVID-19 pandemic, the global tech industry has lost $7.4 trillion of its total value. In response, 1,013 tech companies laid off 153,160 in 2022, 59.57% more than the 95,991 that had been laid off since the onset of COVID-19, before 2022.
Tech companies like Meta, Twitter and Amazon led these layoffs. Nigerian companies were not isolated from the global reality of the technology sector.
In an interview with The PUNCH, the founder of Lendsqr and trustee of Open Banking Nigeria, Adedeji Olowe, said: “These are factors that influence the outflow of money. This cycle, that is, the shortage of funds, is not going to last forever.
“It is likely to get worse towards the end of the year, although by next year it will start to take shape again. Between now and when things start to pick up, start-ups without strong foundations are at risk. Much of this is already happening in the United States. Startups are struggling and laying off staff, and when this happens, it reflects what could happen here as well.”
On the investment front, startups in Nigeria have not fared well even though they have raised almost $1.2 billion and need to raise at least $534 million to improve on 2021 figures, according to reports from ‘Africa. : The Big Deal’.
The report tracking transactions above $100,000 revealed that despite having a great first half of the year, which carried over into the second half, things were quiet on the investment front in November. He stated that startups must raise $534 million in December to surpass the amount raised in 2021.
The startup sub-sector of the ecosystem was not the one that was affected by global realities, as the telecom sub-sector had to deal with high energy costs, rising inflation and multiple taxes.
In 2022, telcos tried at least twice to increase the cost of their services in response to the prevailing operating environment. In May 2022, a leaked letter from the Nigerian Association of Licensed Telecom Operators to the Nigerian Communications Commission revealed that telcos were proposing to the regulator a 40% increase in the cost of calls, SMS and data due to the increase in the cost of operating a company in the country.
His proposal would have increased the minimum price for calls from N6.4 to N8.95 and the maximum price for SMS would have increased from N4 to N5.61. According to the telecommunications companies, they were hit financially by the country’s economic downturn in 2020 and the effect of the ongoing war between Ukraine and Russia.
Although nothing was done about it, the NCC allowed telecommunications companies to increase the price of some of their Internet packages later in the year. Subsequently, MTN Nigeria Communications Plc and Airtel Nigeria increased the prices of their Internet data services by approximately 10 per cent.
They had to reverse their prices after the NCC rejected final approval for the price revision. Furthermore, one of the main conversations that dominated the telecommunications sector was multiple taxation.
During the year, the Federal Government tried to collect excise taxes on telecommunications services. According to the telecommunications companies, this would have increased the consumption cost of telecom services to 12.5 percent. Against this, the Minister of Communications and Digital Economy, Isa Pantami, revealed that the sector paid around 41 taxes to both the federal and state governments.
He said: “The ICT sector is overloaded with so many tax categories. If care is not taken, this is going to jeopardize the achievements and gains we have recorded so far in the sector.”
Subsequently, the Federal Government announced the suspension of this policy.
There was an increase in the number of cyber threat advisories issued by the NCC through its Computer Security Incident Response Team in 2022. The commission issued more than 10 alerts in the year, ranging from bank details theft malware to malware of vehicle theft.
A Check Point Research Threat Intelligence report indicated that Nigerian businesses experience around 2,308 attacks weekly across all industry sectors. He explained that during a six-month period, 62 percent of companies operating in the country were victims of attacks that allowed cybercriminals to gain remote control of their devices and the private data stored on them.
According to the NCC, Nigeria loses about $500 million a year to cybercrime.
It wasn’t all bleak for the country’s tech sector last year. The ICT sector remained one of the bright spots of the country’s economy. In the third quarter of 2023, the information and communications sector contributed 20.32% of the nation’s total nominal GDP.
The National Statistics Office said: “In nominal terms, in the third quarter of 2022 the growth of the sector was registered at 20.32 percent (annual), an increase of 9.15 percentage points from the rate of 11.17 percent. percent registered in the same quarter of 2021, and 6.20 percentage points higher than the rate registered in the previous quarter.”
MTN and Airtel earned N1.92 trillion calls and data between January and September 2022, an increase of 18.27% over N1.62 trillion earned in the corresponding period of 2021.
Furthermore, the country was one of the few African countries to successfully launch 5G with MTN and Mafab Communications winning the first 5G spectrum auction bids. In August, MTN conducted a pilot launch of 5G in Lagos and announced plans to roll out the service in Abuja, Port Harcourt, Ibadan, Kano, Owerri and Maiduguri.
While MTN has rolled out 5G, Mafab Communications Limited has yet to start its services. The company obtained a five-month NCC implementation extension after delays in its numbering plan and unified access service license.
Before the year was out, the commission announced plans to auction off two more 5G spectrum. However, the auction failed to attract many companies and only Airtel Network Limited emerged as the sole bidder for its 3.5GHz spectrum band for 5G rollout in the country.
The NCC proceeded to an allocation stage, with Airtel willing to pay $273.60 million for the license. The company is expected to roll out 5G services in 2023.
Commenting on the launch of 5G in the region, the GSMA, the global telecommunications association, said: “5G-related activities are starting to pick up across the region.
“These include 5G spectrum auctions, 5G pilot and commercial trials, and efforts to develop locally relevant 5G use cases.”
Furthermore, Nigeria finally signed its Start-up Bill, a bill aimed at creating an enabling environment for growth, attracting and protecting investment in technology startups, into law.
Commenting on this, Oswald Guobadia, Principal Special Assistant to the President (Digital Transformation) and Nigerian Startup Bill Leader, said: “Nigeria’s Startup Bill serves as an enabler for centers to technologies achieve sustained growth. State adoption, for example, will encourage this.
“NSB also has a seed fund that will be accessed by founders, centers and accelerators in Nigeria. This fund will be administered by the NSIA. We are intentionally trying to create that fabric of innovation across the country and states need to embrace it so we can see the dividends.”
In an interview with the punch, co-founder of Flutterwave and Andela, and founder/CEO of Future Africa, Iyinoluwa Aboyeji, said: “I think it’s really the ‘end of the beginning.’ Nigeria’s startup ecosystem has been around for a long time, but it’s only in the last 10 years that we’ve started to attract significant attention from Silicon Valley and global investors.”
Meanwhile, 2022 ended on a mixed note for the country’s tech sector. A document titled “Invitation to a One-Day Public Hearing and Submission of Memoranda on the Finance Bill of 2022,” released by the House Finance Committee, revealed that the federal government was reconsidering taxation. Specials on telecommunications services.
In addition, there was a controversial bill to amend the law creating the National Information Technology Development Agency before the House of Assembly. This bill, if passed, would affect internet freedom, the media, social media companies, and technology companies operating in the country.
Industry insiders believe that some of the tech industry’s challenges will extend into 2023. They also claimed that the industry would need to reposition itself with data becoming a more pronounced revenue stream for telcos, for example.